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4 Reasons Finance and Tax Struggle with Compliance

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Editor Coda
2022/03/02

With real-time reporting, there’s no time to wait for processes and controls to fix errors that happen in reporting cycles. It’s essential that all of the tax-relevant information in invoices is correct the first time.

The cost, if it isn’t correct, is getting hit not only with fines, but also supply chain disruptions.

But finance and tax professionals have a lot working against them.

  1. ERPs are not built with tax in mind and are often not fit for purpose when it comes to tax determination or complex VAT flows.
  2. Much of the burden of inputting tax codes is often on team members who aren’t tax experts.
  3. Most large enterprises have data quality issues, and finance and tax teams often don’t have the authority or time to overhaul master data to bring the quality up to standard.
  4. Legislative changes are happening at a rapid pace, and it’s a challenge just to keep up with the requirements.

 

A cross-functional challenge

Indirect tax touches many different elements of the business. While VAT knowledge tends to sit in small, specialist teams, many other departments are involved in the process. The data for tax determination touches finance teams, procurement teams, and sales teams, and is often in systems owned by IT.

Tax is also a notoriously complex area. But, while tax departments are typically small and overburdened, it’s still not reasonable to expect finance or procurement teams to become tax experts.

Indirect tax teams are responsible for VAT processes but rarely own the processes that impact them, such as invoice data entry or control of master data.

Preventative controls: A mindset shift

So how do we respond to these cross-functional challenges?

Ensuring compliance in this rapidly shifting landscape requires a shift in mindset. But it can be a challenge to get the wider business enthusiastic about making changes to improve indirect tax compliance. And with the sheer number of processes that impact tax, it can be daunting to think about how to clean up data and overhaul processes.

But it has to be done. The way forward is to bring in controls, in a preventative and automated way, to improve the processes upstream of tax. The right controls and technology are helping companies reduce the manual burden and focus their team’s time and energy on solving problems and adding value.

Data controls. We can’t expect data to stay clean without processes in place. Processes that get your data clean and keep it clean are essential to any automation project. Get data wrong, and you’re just moving bad information around faster.

Modern tax technology can guide your organization. Tools like tax engines can help provide the correct VAT calculation for every AP or AR transaction in real time. The system can maintain the latest tax rules, so you aren’t reliant on Tax and IT to constantly upgrade your systems and teams. 

 

In partnership with Vertex, we offer a number of resources to help finance and tax professionals navigate this new landscape.

Upcoming Events

Vertex Exchange. This empowering event gets to the root of the issues at the to share knowledge around tax trends, legislation, latest technologies and best practices for effective global tax management.


On-Demand Webinars

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